1 Obvious Way This Consumer-Facing Stock Can Beat the S&P 500 Over the Next 3 Years

It wasn't long ago that Starbucks was energizing investors' portfolios.

During the three-year stretch leading up to their all-time high in July 2021, shares of the coffeehouse chain soared 145%. This gain handily outperformed the S&P 500 index. But operational challenges have resulted in heightened volatility since then.

This coffee stock trades 22% below its record (as of April 14). But there's one obvious way that it can beat the benchmark over the coming three years.

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Management expects profits to rise meaningfully

At its 2026 Investor Day meeting in late January, Starbucks' leadership team gave investors one reason to be extremely optimistic about the future. Management provided an explicit forecast, expecting adjusted earnings per share (EPS) to total between $3.35 and $4.00 in fiscal 2028. Compared to fiscal 2025's $2.13, this implies fantastic growth of 73% (at the midpoint).

Investors should want nothing more than this to become reality. That's because in the past three years, between fiscal 2022 and fiscal 2025, adjusted EPS declined by 28%. Starbucks dealt with falling same-store sales, as consumers didn't appreciate what became a subpar experience characterized by long wait times and a complex menu at its locations. The competitive intensity of the industry also doesn't make things easy.

Starbucks is making progress with its turnaround efforts. Comparable transactions globally increased 3% in the fiscal 2026 first quarter (ended Dec. 28, 2025). The business revamped its loyalty program, is focused on menu innovation, and is investing in its labor and technology to streamline store operations.

Growth is also a priority over the long run. Executives see potential for more locations in the U.S. and internationally.

Investors shouldn't overlook this headwind

All else equal, if Starbucks can increase adjusted EPS 73% between fiscal 2025 and fiscal 2028, then its stock should have no problem outperforming the S&P 500, as this translates to a 20% annualized gain. Profit growth is a powerful tailwind for shareholder returns.

This outcome is not guaranteed, though, as there is always a lot of uncertainty with any company's ongoing turnaround efforts. Not only does Starbucks need to execute flawlessly, but external forces like industry trends, consumer behavior, and macro forces must work to its benefit as well.

Even assuming everything goes right, however, and there is still one headwind investors shouldn't overlook: valuation. Starbucks isn't cheap. The stock trades at 46 times its fiscal 2025 adjusted EPS right now. This multiple would need to stay constant three years from now for the shares to generate a return that mimics the possible 73% rise of adjusted EPS mentioned earlier. I view this as an unlikely scenario.

Despite management's upbeat financial forecast, investors might be better off avoiding this stock that provides no margin of safety.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool has a disclosure policy.